Market regulatory authorities in Xi'an, Shaanxi province, said on Tuesday that a team will thoroughly investigate suspected violations of the law, including an alleged "financial service fee" charged by a Mercedes-Benz dealer.
A customer said the engine of the Mercedes-Benz CLS300 she bought from a local dealer for about 660,000 yuan ($98,400) developed problems soon after she drove it away from the dealership on March 27.
She complained and tried to get Xi'an Lizhixing Co, the dealer, to give her a refund or exchange the car for another one, but the company refused, she said.
Last week the woman went to the dealership again and sat on the hood of another car, a red Mercedes-Benz, as she complained. A video subsequently went viral online.
The woman said she had to pay 15,200 yuan as "financial service fee" to an employee at the dealer, but it was not clear what that was for, and she did not get an invoice for the payment.
The Xi'an Market Regulatory Administration said the investigative team has summoned employees of Beijing Mercedes-Benz Sales Service Co's branch in Xi'an to look into suspected violations of law or regulations, including charging the alleged financial service fee.
The China Banking and Insurance Regulatory Commission said on Monday that it had ordered its Beijing branch to investigate Mercedes-Benz Financial Services to see whether it charges financial service fees via the dealers. Xi'an's tax authority also said on Monday it is investigating the dealership for suspected tax evasion.
Zhou Xiaoyun of Guangqiang Law Firm in Guangzhou, Guangdong province, said charging a financial service fee is a prevalent practice among car dealers in China, with fees usually equivalent to about 2 percent of the loan amount for buying a car, but it is illegal for dealers to charge such fees, since they are not permitted to provide financial services.
In the wake of the case, the regulatory administration has begun a special two-month campaign to ferret out irregularities in car sales that damage the interests of consumers, including forcing buyers to purchase vehicle insurance from a designated insurer or forcing them to get loans from a particular provider.
On Saturday, the dealer had reportedly agreed to an immediate refund to the woman during a face-to-face negotiation arranged by the market regulatory authority in Gaoxin district, where the dealer is located. But the woman then refused, and demanded an investigation.
Mercedes-Benz Financial Services said on Sunday that the company charges no financial service fees to dealers or customers, and has repeatedly told its dealers to abide by the law and guarantee customers' rights.
Beijing Mercedes-Benz Sales Service Co apologized to the customer on Tuesday afternoon, admitting that the case revealed problems in customer service and business operations.
"The matter reveals problems in our working process at Mercedes-Benz, something we have had to regrettably learn and which we will rapidly rectify," it said in a statement.
At the same time, the statement said, the sales franchise for Mercedes-Benz has been suspended for the dealer in question, and if the ongoing investigation finds that the dealer didn't meet the standards of Mercedes-Benz or the legal requirements of the country, the suspension will be made permanent.
"Furthermore, we will conduct, in the immediate and near future, in our dealer network, independent audits to ensure compliance with our standards and to improve customer service processes," the statement said, adding that it would see that violations of company standards are punished.